Witney Schneidman – Global Policy Watchhttps://www.globalpolicywatch.com
Key Public Policy Developments Around the WorldThu, 30 Apr 2020 19:12:25 +0000en-US
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1 https://wordpress.org/?v=5.3.3&lxb_maple_bar_source=lxb_maple_bar_sourceIt’s Time to Help Africa Fight the Virushttps://www.globalpolicywatch.com/2020/04/its-time-to-help-africa-fight-the-virus/
Thu, 30 Apr 2020 19:11:56 +0000https://www.globalpolicywatch.com/?p=10026Continue Reading]]>If COVID-19 spreads across Africa, it would not only be a human catastrophe for the continent, but one that threatens the Northern Hemisphere with future outbreaks and further human and economic losses. What is true in the United States, where people in poor and minority neighborhoods are dying in disproportionate numbers, is true for the world as a whole: No one will be safe so long as anyone is at risk.

If the United States, Europe, and others succeed in containing the virus in the coming months, there is no way contagion throughout Africa could be contained there. A second wave rising in Africa would almost surely crash on U.S. shores. In this way, the coronavirus pandemic has laid bare the world’s interdependence; the future safety of every U.S. community therefore depends on the success of every community in Africa and elsewhere.

While giving priority to the fight here at home is essential, the time to help Africa fight the virus is now.

Click here to view the full article co-written by Witney Schneidman as it appeared in Foreign Policy (April 29, 2020).

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

]]>South Africa’s Economic Response to the Covid-19 Pandemic (Part II)https://www.globalpolicywatch.com/2020/04/south-africas-economic-response-to-the-covid-19-pandemic-part-ii/
Tue, 21 Apr 2020 14:58:36 +0000https://www.globalpolicywatch.com/?p=9983Continue Reading]]>On 6 April, 2020, we published an article outlining South Africa’s initial economic response in support of its already ailing economy against the adverse economic effects of the coronavirus pandemic. Two weeks have passed since we first published that article, and we think it is prudent to provide this follow-up, outlining the latest developments in South Africa.The number of Covid-19 cases in South Africa has increased steadily, with, as of midday on April 20, 3,158 officially reported cases. President Cyril Ramaphosa announced as a consequence an extension of the initial 21-day lockdown period, adding a further 14 days until April 30.With the social and economic effects of the extended lockdown having devastating impact on the South African economy –already in a technical recession before the first case of Covid-19 was reported in the country in early March– President Ramaphosa is reportedly considering a R1 trillion (approximately $53.5 billion) stimulus package. This stimulus packaged was discussed and agreed in principle at a meeting of the National Economic Development and Labour Council (Nedlac) on Friday April 17, and is said to be similar to the $2 trillion financial stimulus package recently announced by the United States Government insofar as it will seek to target those sectors hardest-hit by the lockdown by offering assistance to financially distressed companies. How a stimulus package of this size would be funded remains to be seen, but the imposition of a one-off wealth tax is apparently being considered. Such a stimulus package might also include further interventions by the Reserve Bank, possibly additional interest rate cuts or bond-market purchases, to inject additional liquidity into the financial markets.In addition the proposed R1 trillion (approximately $53.5 billion) stimulus package, the following are some of the additional measures announced by the South African Government to support the economy:

Finance Minister, Tito Mboweni, announced that the National Treasury will look to revise the country’s budget, to take into account the effects of Covid-19, and to ensure reallocation of any unnecessary spending to the Government’s anti-Covid-19 measures, as well as to the financing of growth-enhancing initiatives;

The Prudential Authority – a regulator administered by the Reserve Bank – welcomed the measures South African banks had individually taken to support customers during this period of economic turmoil and uncertainty, and announced a raft of measures to support the banking system, including lowering the liquidity cover ratio – a ratio setting out the liquid assets a bank has to maintain in relation to its anticipated outflows – from 100% to 80%. It is anticipated that these measures could, in theory, free up approximately R540 billion (approximately $29 billion) in reserves for South African banks to deploy in support of their customers;

The Government and the banking sector are looking at establishing a ‘Funding for Lending Scheme,’ in terms of which the South African Government would provide government guarantees to South African banks, thereby enabling them to make facilities available to distressed businesses they would otherwise not be able to lend to. A similar intervention has been implemented in the United Kingdom;

Reserve Bank Governor, Lesetja Kganyago, less than a month after his previous announcement, further cut the repo rate by 100 basis points, lowering the benchmark lending rate in South Africa to 4.25% – the lowest level since the apartheid era. In making his announcement, Governor Kganyago noted that the Reserve Bank now expects GDP to contract by 6.1%, compared to the 0.2% contraction announced a few weeks ago;

President Ramaphosa, on proclaiming the lockdown extension, also announced that the National Executive (being the Cabinet and deputy ministers), as well as all provincial premiers, will take an immediate 33% salary cut, which they will contribute to the Solidarity Fund. A number of executives from significant South African businesses have since announced large cuts to their remuneration packages which they will contribute to the Solidarity Fund – which now boasts a balance of R2.2-billion (approximately $117 million) since it launched on 23 March – this is a clear sign that business has rallied behind President Ramaphosa;

The exemption of commercial banks from the provisions of the Competition Act to enable them to develop common debt relief approaches has been extended to the retail property sector, the hotel industry and the healthcare sectors; and

The United States has recently also stepped up its financial assistance to South Africa, with the United States Agency for International Development making $8.4 million (approximately R158-million) available to South Africa to aid its fight against COvid-19 pandemic.

Notwithstanding these actions, criticism is being levelled at the Government for the speed at which these economic interventions are being implemented. While the Government was praised for its speed in implementing measures to control the virus, it is now being alleged that indecision and differences in political ideology are hampering the development and implementation of a comprehensive economic stimulus plan. At a special cabinet meeting held on Wednesday 15th April, failed to agree on a decisive plan, instead resolving to hold another meeting on Monday, April 20. The outcome of that meeting remains unclear.

Despite this criticism, a R1 trillion stimulus package–an amount nearly equivalent to the government’s total spending of R1.95-trillion for the current fiscal year–would be a significant step forward for a country otherwise facing a deep economic recession.

If you are operating a business in South Africa and need advice or guidance on how any of the above-mentioned provisions relate to you, please contact Mike McLaren, mmclaren@cov.com, Chloë Taylor, cataylor@cov.com, or Mosa Mkhize, mmkhize@cov.com.

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

]]>Audio and Key Takeaways Re: Covington’s Ability to Help Respond to the COVID-19 Pandemic in Africahttps://www.globalpolicywatch.com/2020/04/audio-and-key-takeaways-re-covingtons-ability-to-help-respond-to-the-covid-19-pandemic-in-africa/
Tue, 07 Apr 2020 17:51:54 +0000https://www.globalpolicywatch.com/?p=9913Continue Reading]]>As a complement to our March 26, 2020 blog “Covington’s Ability to Help Respond to the COVID-19 Pandemic in Africa,” you may access the audio of our briefing call here.

With African governments increasingly taking strong actions to impede the spread of the COVID-19 virus, including a number of jurisdictions imposing full lockdowns, a few of our seniors lawyers and advisors on Africa outline considerations and guidance that businesses should have top of mind during this difficult time.

Cross-cutting issues that have been addressed in the briefing include:

§ Force Majeure/Change in Law;

§ Navigating financing and commercial agreements;

§ Insurance considerations; and

§ Public policy considerations.

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

South Africa did not record the first case of Covid-19 in Africa, but it now has the highest number of reported cases on the continent.

Having had the benefit of watching governments respond to the outbreak of the pandemic in Asia, Europe and the United States, President Cyril Ramaphosa on March 15, 2020, with only 61 confirmed cases and no deaths, declared a National State of Disaster that imposed a number of travel and other restrictions. Eight days later, the President took the further unprecedented step of announcing a national lockdown – a series of measures designed to stem the spread of the Covid-19 virus in the country.

In addition to the lockdown measures, the South African Government, the National Treasury of South Africa and the South African Reserve Bank announced a number of fiscal, monetary and other interventions to bolster the economy and provide a safety net for the most economically vulnerable. These interventions include, among others:

Support for Critical Businesses: Funding of more than ZAR 3 billion (approximately $160 million) will be made available to vulnerable firms and businesses critical to the country’s response and recovery. The Industrial Development Corporation, together with the Department of Trade, Industry and Competition, will take active measures to support and stimulate the economy.

Bridge Financing: To ease the disruption to certain critical supply chains, bridge financing is available to support supply chain interruptions as well as working capital to ensure energy security.

Solidarity Fund: A Solidarity Fund has been created to which all citizens, corporates, businesses and the international community can contribute. The South African government is providing seed capital of ZAR 150 million (approximately $7.8 million).

Employee Support: The establishment of a Temporary Employee Relief Scheme to assist distressed companies with wage payments in an attempt to avoid retrenchments.

Unemployment Insurance: The government is working to deploy funds from the ZAR 160 billion (approximately $8.38 billion) Unemployment Insurance Fund for those who have lost their jobs.

Tax Subsidies: For individual and small businesses whose turnover is below ZAR 50 million (approximately $2.7 million) will have access to tax subsidies and be permitted to defer: (i) 20% of their pay-as-you-earn tax liabilities over a four month period, and (ii) a portion of their provisional corporate income tax payments (without incurring penalties or interest charges) for a six month period. These concessions are expected to assist over 75,000 small and medium-term enterprises.

Debt Relief Fund: The establishment of a debt relief fund by the Department of Small Business Development that will assist small and medium enterprises in distress from the pandemic.

Bank Relief: The exemption of commercial banks from the provisions of the Competition Act to enable them to develop common debt relief approaches.

Repo Rate Cut: The Reserve Bank of South Africa cut the repo rate – the benchmark lending rate in South Africa – by 100 basis points and embarked on a program of buying an unspecified amount of South African government bonds, in order to inject additional liquidity into the South Africa financial markets.

Contributions from prominent businesses and business leaders in excess of ZAR 5.5 billion (approximately $288 million) have also been made, and all of South Africa’s major banks have announced measures to support the most vulnerable South Africans and South African businesses. The financial contributions from these South African businesses and business leaders will be used to provide relief to small and medium enterprises affected by the Covid-19 pandemic as well as to purchase much needed personal protective equipment for South Africa’s healthcare workers.

While these measure are vital and encouraging, it will be a significant challenge for the South African Government to protect its economically vulnerable majority population. This was compounded on March 27, 2020, when Moody’s Investors Service (“Moody’s”) downgraded South Africa’s sovereign credit rating to junk status. Moody’s was the last credit rating agency to have South Africa’s long term foreign and local currency debt ratings on investment grade status. Four days later, Fitch Ratings Inc. (“Fitch”) further downgraded the five largest South African banks to junk status, and on Friday, April 3, 2020, further downgraded South Africa’s sovereign credit rating. Fitch noted that the decision was driven by the expected impact of the Covid-19 virus, and South Africa being particularly exposed to the pandemic which it warned is likely to lead to a decline in client activity and lower interest rates.

Significantly, South Africa’s finance minister, Tito Mboweni, said last week that he is prepared to approach the World Bank and the International Monetary Fund to assist South Africa in its fight against Covid-19—something that has been an anathema to successive ANC governments. Over the last three years, South Africa has borrowed an estimated $2 billion from the Shanghai-based New Development Bank, a financial institution created by the BRICS—an amalgam of Brazil, Russia, India, China and South Africa. Cyril Ramaphosa, in his capacity as chair of the African Union, also joined with Ethiopia’s Prime Minister, Abiy Ahmed, to press the G20 to provide debt relief and financial aid to those African countries most impacted by Covid-19.

Ultimately, the Covid-19 pandemic will pass and the world, and South Africa, will enter ‘recovery mode.’ What the economic recovery in South Africa might look like, or how long it might take, remains to be seen. In terms of acting quickly in order to protect the country’s citizens, however, President Ramaphosa’s leadership has been central to the government’s decisive response to Covid-19 in South Africa.

If you are operating a business in South Africa and need advice on how any of the above-mentioned provisions relate to you, please contact Mike McLaren, mmclaren@cov.com, Chloë Taylor, cataylor@cov.com, or Mosa Mkhize, mmkhize@cov.com.

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

]]>Covington’s Ability to Help Respond to the COVID-19 Pandemic in Africahttps://www.globalpolicywatch.com/2020/03/covingtons-ability-to-help-respond-to-the-covid-19-pandemic-in-africa/
Thu, 26 Mar 2020 16:23:22 +0000https://www.globalpolicywatch.com/?p=9847Continue Reading]]> With African governments increasingly taking strong actions to impede the spread of the COVID-19 virus – including in a number of jurisdictions, imposing full lockdowns – we are able to provide assistance to our clients, financial institutions, developmental finance organizations, companies and organizations on the continent. We are available to get on a call at short notice, at no cost, or respond to questions sent via email. Our interest is to share our perspective on various measures being implemented by governments in Africa and elsewhere, the impact these actions might have, and how our experience can be of assistance at this critical time.

Force Majeure: COVID-19 will have a significant impact on project development markets, construction and infrastructure transactions, supply contracts, and a host of other commercial transactions. As a result, companies will be compelled to assess the costs and benefits of claiming force majeure relief. Force majeure is generally found when an event is (i) beyond the breaching party’s control; and (ii) is not reasonably foreseeable. For example, travel bans imposed by governments will impact the ability of skilled labor and professionals from other countries to complete work under the project development contracts. This will cause delays and create grounds for force majeure claims. Other issues, such as scheduled maintenance, especially if governments limit gatherings to no more than 10 people, could be grounds to claim force majeure. And what happens when a contract stipulates that a project suspension notice must be delivered by hand—and people are not permitted to leave their home or offices are closed?

Financing Transactions, Mergers and Acquisitions (M&A) and Material Adverse Effect: Navigating commercial, M&A and finance agreements during these times can and will be an extremely difficult and daunting task. Whether there are potential issues of force majeure (as discussed above), questions as to the occurrence of a Material Adverse Effect, issues relating to the impossibility of performance, issues relating to disclosures and announcements, or other issues, our multi-faceted and multi-jurisdictional team can mitigate the negative consequences of these complex matters.

Insurance: Covington’s insurance practice group has helped policyholders with losses arising from hurricanes (Katrina), terrorist attacks (September 11), industrial accidents and environmental damages (Deepwater Horizon and Exxon Valdez) and numerous other large losses, and we can be helpful in issues arising from the COVID-19 pandemic. As we have described in a recent alert on insurance best practices, for entities that are considering pursuing insurance claims related to COVID-19, it will be important to document timeframes for shutdowns, supply disruptions, as well as all lost income attributable to the pandemic.

Sourcing Supplies from China and Europe: Companies in Africa are naturally looking to other markets to source ventilators, surgical gowns, masks and other Personal Protective Equipment to respond to the pandemic. Our Food and Drug Regulatory practice and our offices in Shanghai and Beijing can be helpful in evaluating suppliers, their relevant certifications and putting in place commercial contracts to ensure the timely export of materials out of Asia. We can also be helpful in this area from our offices in Brussels, Frankfurt and London in respect of exports being made from the United Kingdom and continental Europe.

Interactions with Government: As governments attempt to blunt the pandemic’s public health and economic effects, many companies are frantically working to seek the help they believe they need to survive these trying times and to preserve their employees’ jobs. In addition, companies with products or services that could assist the ability of governments to respond to the crisis are considering ways to contract with government agencies. As a consequence, many companies are more deeply engaged with government officials than ever before, including by seeking financial loans, grants, contracts, product approvals, regulatory relief, or guidance on how to operate in these times. But the basic rules covering interactions with government—including ethics, bribery, and procurement fraud laws—all remain in place. Companies that cut compliance corners now may pay a price down the road. We also have a number of former diplomats in our ranks who have experience working with decision-makers at all levels of governments in our Global Problem Solving practice.

Lessons from Other Regions: As a global law firm head-quartered in Washington, D.C., we are closely tracking federal, state and regional developments in the United States that might impact our clients. We have put together our analysis of these developments in a Legal and Business Toolkit that can be accessed here. To the degree that there might be relevance for what companies are experiencing in Africa, we would be happy to share our experience working with clients in the U.S. and other jurisdictions.

The Next Pandemic: While organizations and governments may be currently overwhelmed responding to the COVID-19 crisis, they can seize opportunities to consider how they might best prepare themselves for the next pandemic, incorporating lessons from the current and previous pandemics. Lessons already evident from this pandemic are that social and economic disruption may be prolonged, medical interventions may not exist or not be available, and that decision makers may be held to account. A review of existing or new plans should also inform broader catastrophe planning and business continuity.

For further information on any of these topics or other questions, please reach out to Covington’s COVID-19 Task Force, COVID19@cov.com, Witney Schneidman, wschneidman@cov.com, Ben Haley, bhaley@cov.com, Mike McLaren, mmclaren@cov.com, or Mosa Mkhize, mmkhize@cov.com.

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

]]>Coronavirus: Potential Implications for Africahttps://www.globalpolicywatch.com/2020/03/coronavirus-potential-implications-for-africa/
Wed, 18 Mar 2020 17:04:48 +0000https://www.globalpolicywatch.com/?p=9825Continue Reading]]>The Coronavirus (hereinafter “COVID-19”) is upending lives around the world—equally in developed and developing countries. Some are already affected by the deadly impact of COVID-19 (e.g. China, Italy, and France), while others’ lives have been altered due to efforts taken to “flatten the curve,” to ensure hospital systems are not overrun with patients in need all at once (e.g. the United States). Knowing that the worst is yet to come, experts are bracing for potentially devastating impacts throughout the African continent.As of March 18, 2020, the World Health Organization (“WHO”) reported that there were just over 475 cases in 30 countries on the continent. For a continent of 1.2 billion, this is a low number. However, we know that just as testing in the United States is not widely available, nor is it in Africa. Therefore, the number of actual cases is likely much higher than is currently being reported. In February, Bill Gates warned that COVID-19 may kill upwards of 10 million people in Africa.

High Risk FactorsThere are several high risk factors facing the continent. First, as discussed by the Lancet’s Preparedness and Vulnerability study, not all countries on the continent are equipped to implement the technical and operational interventions necessary for rapid testing and isolation of infected individuals who are traveling to the continent. China is Africa’s largest commercial partner, which means there is a high travel volume of Chinese nationals—where the pandemic started—to the continent and therefore, potential risk for the rapid spread of COVID-19. While this link has not yet been documented, it is too early to rule it out. Thus far, many of the confirmed cases have documented links to travelers coming from the United States and Europe.

Second, not all travel to the continent has been halted. As of March 14, 2020, the Lancet reported that Ethiopian Airlines, the largest carrier in Africa, continued flights from Africa to China, while all Chinese airline companies and others continued to operate as well. Lancet assesses that the overall risk of importation to Africa is lower than that to Europe (1% vs 11%, respectively, according to current estimates), but “response and reaction capacity are also lower.”

Third, the healthcare infrastructure throughout the continent is fragile, and the public health impacts are likely to be further complicated by populations disproportionately affected by HIV, tuberculosis (TB), and other infectious diseases. Tedros Adhanom Ghebreyesus, Director-General of the WHO, recently said his “biggest concern” was COVID-19 spreading in countries with weak health systems. Coordinated action across all government sectors, utilizing trusted networks of professional civil servants, will be key to responding to COVID-19 in Africa.

Potential Mitigating Factors

One thing Africa has going for it in the face of COVID-19 is its youthful population, with the median age under 20. Only three percent of sub-Saharan Africa’s population is older than 65, and thus far, all indications are that children and younger people with no underlying conditions fare quite well with COVID-19.

Some have also suggested that higher average temperatures on the continent will make it harder for COVID-19 to survive and spread, but this is disputed and still an open question.

African Governments Respond

On March 15, 2020 South Africa’s President, Cyril Ramaphosa, declared a “national state of disaster,” and closed schools and banned mass gatherings. He also imposed travel restrictions on nationals from high risk countries including Italy, Iran, the US, the UK, China and elsewhere. The number of known confirmed cases in South Africa sits at 62 as of March 17, 2020. As described by Mail & Guardian, “With the disease currently growing at a rate of 61% a day in South Africa, by the end of this month we could run out of ICU beds.”

Kenya’s President Uhuru Kenyatta followed suit by closing schools, discouraged large gatherings, and banned travel to Kenya except for Kenyan citizens and foreigners with valid residence permits. In an effort to discourage the physical handling of money, Kenya’s largest telecom provider, Safaricom, will implement a fee-waiver on all mobile-money transactions under $10 that are carried out on its platform, M-Pesa. Kenya has three confirmed COVID-19 cases.

Many other countries are taking similar actions to prevent a wave of infections, but large gatherings continue to occur in some countries. Regardless of how many Africans are infected and have adverse health impacts, the negative economic impact cannot be avoided. The UN Economic Commission on Africa projects that economic growth across the continent will drop from 3.2 percent to about 2 percent in 2020. Tourism, supply chains, commodity exports, and remittances are just a few of the sectors likely to be negatively impacted. Governments will have to pay more for food products, pharmaceuticals, and energy.

Implications for Project Finance Projects

COVID-19 will have a significant impact on project development markets across Africa with companies contemplating claiming force majeure relief during these unprecedented times. Force majeure is generally found when an event is (i) beyond the breaching party’s control and (ii) is reasonably unforeseeable. For example, travel bans placed on many Chinese companies will have a direct impact on the ability of persons from affected countries to travel to the continent to complete work under project development contracts. This will cause delays and create grounds for force majeure claims. When negotiating transaction documents, parties should be mindful of the potential impact of COVID-19 may have on their contracts.

Chinese manufacturers have issued shutdown notices which will have a direct impact on projects in the construction phase. Various African countries have entered into short and long-term collaborative arrangements with Chinese partners that not only supply the material for the development of various projects, but also supply the technical support and expertise for various projects—from the feasibility study to the commercial operation phases, and the subsequent continued management of the project. As the number of new confirmed COVID-19 cases decreases in China, it appears that the shutdown notices may soon be lifted. However, as the number of cases continues to rise in Africa, the continuity of projects may not improve until the spread of COVID-19 is controlled.

We will continue to monitor the rapidly evolving situation on the continent as a consequence of COVID-19. If you are doing business on the continent and require further guidance and legal advice, please contact Witney Schneidman at wschneidman@cov.com or Bob Kayihura at RKayihura@cov.com.

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

Africa’s Growth Prospects. Africa’s gross domestic product (GDP) is expected to grow at 3.8 percent in 2019, which is a significant improvement over last year’s regional growth rate of 2.6 percent. Excluding the continent’s largest economies (Angola, Nigeria and South Africa), which are growing collectively at an average of 2.5 percent, the aggregate growth rate for the region would be a healthy 5.7 percent. According to Foresight, about half the of world’s fastest growing economies are in Africa, with 20 economies expected to grow at five percent or more over the next five years. This includes Burkina Faso, Tanzania, Uganda, Kenya, Senegal, Benin, Cote d’Ivoire, Ethiopia, Ghana and Rwanda. We will be watching whether commercial debt, both from the issuance of Eurobonds and Chinese loans, starts to be a drag on growth. Good governance and transparency will also impact the economic performance across the region.

African Continental Free Trade Agreement. While some of the world’s leading economies struggle to grow due to the implementation of protectionist trade policies, the leadership of the African Union (AU) is working to create the world’s largest free trade zone since the formation of the World Trade Organization. Concerns about an increasingly bureaucratic AU did not prevent 50 of the 55 African nations from signing the AfCFTA. To date, 18 of the required 22 countries have ratified the framework designed to eliminate tariffs on a large variety of goods and significantly boost intra-Africa trade. Non-tariff barriers to trade—including burdensome customs controls, high settlement payments, deficient distribution channels, and corruption—may prove to be the most difficult hurdles to a more prosperous Africa and deserve close scrutiny as the AfCFTA progresses toward implementation. Furthermore, collaboration between the private sector and governments will be critical in areas of intra-African trade infrastructure, trade finance, trade information, and logistics services for the AfCFTA to be successful.

Enhancing Africa’s Connection to World-Class Computing. Africa’s economic growth in 2019, which will be accelerated by technological innovation across all sectors, coincides with global trends toward digital and shared economies. A growing focus on efficient and scalable utilization of assets will lead to innovative, high growth, and high impact opportunities in Africa. Critical to this transformation is the commitment by leading cloud computing companies to build data centers on the continent, which will enable broader access to advanced computing resources and services driven by artificial intelligence, machine learning, and the Internet of Things (IoT). Cloud computing resources will lead to more productive and knowledge-based economies and help Africa’s young and fast-growing population create innovative opportunities while addressing challenges in key sectors like healthcare, transportation, trade, and education. How African policy makers collaborate with the private sector to enact enabling and harmonized privacy, cybersecurity, and related policies and regulations that protect individual and institutional data is one of the key issues to watch in this space.

Development Finance in Africa. Leveraging the power of the private sector through development finance is an increasingly popular complement to traditional foreign aid around the world. In October, the United States took steps to modernize its approach to development finance with the passage of the Better Utilization of Investment Leading to Development (Build) Act, which was signed into law by President Trump on October 5, 2018. The Act creates a new institution—the U.S. International Development Finance Corporation (USDIFC)—which will merge the Overseas Private Investment Corporation (OPIC) and several USAID facilities, including the Development Credit Authority (DCA), the Office of Private Capital and Microenterprise (OPCM), and enterprise funds. With $60 billion dedicated to USIDFC, the new entity will have twice the amount of money to invest as compared to OPIC’s current lending cap of $29 billion. OPIC’s president and chief executive was explicit about one of the primary motivations behind USIDFC: to be “a financially sound alternative to the state-directed initiatives pursued by China that have left many countries deep in debt.” It is estimated that China leverages $40 billion through is varied development finance institutions, monies implemented with no political conditionalities attached under the umbrella of China’s One Belt One Road initiative. According to the Washington-based Atlantic Council, between 2012 and 2016, projects in sub-Saharan Africa accounted for the largest share of DFI commitments ($14.2 billion), followed by East and South Asia ($10.5 billion), and Latin America ($10.2 billion). Monitoring the implementation of USDIFC, and assessing how its offerings affect China’s DFIs, if at all, will be of interest to corporations and public policy makers alike.

A Continuing Trend of Anti-Corruption Enforcement. Last January, we noted that anti-corruption initiatives were on the rise on the continent, with 2018 declared the “African Anti-Corruption Year” by the African Union. If 2018 is any indicator, we expect that this trend will continue in 2019 and beyond. While the sheer volume of anti-corruption enforcement actions involving conduct in Africa in 2018 was not particularly significant, recent developments suggest that companies operating in Africa can expect heightened scrutiny from anti-corruption enforcers in the coming year. As we have previously described, France’s arrival on the international enforcement scene is likely to be particularly notable in this regard, given the large number of French companies operating in Francophone Africa. On the domestic enforcement front, in South Africa we will be watching developments in the sprawling “State Capture” matter, which is focused on allegations of widespread corruption and conflicts of interest in the government of former president Jacob Zuma. We can also expect U.S. enforcers to continue to be active on the continent, as evidenced by the successful prosecution of Chinese national Patrick Ho in a case involving alleged bribes on behalf of a Chinese energy company in Chad and Uganda, and the early 2019 indictments of a number of individuals in connection with Mozambique’s “Tuna Bond” scandal. Finally, as we have previously discussed, multilateral development banks will continue to play an important enforcement role in Africa. The World Bank, which has aggressively enforced its sanctions and debarment procedures for several years, initiated 28 investigations in Africa in its 2018 financial year alone, representing 41 percent of all new investigations. With this enforcement activity in the background, we expect that companies operating in Africa will need to continue to focus on developing and implementing effective anti-corruption compliance programs. In the coming weeks and months, we will be further analysing anti-corruption developments on the continent, and providing insights on how companies can best mitigate corruption risk in their operations in Africa.

Project Finance. Based on the African Development Bank’s estimate that there remains a $68–$108 billion financing gap to meet Africa’s infrastructure needs, which is estimated to be in the range of $130–$170 billion annually, we expect to see continued growth in project finance projects during 2019. Lending from development finance institutions (DFIs) continues to play a crucial role in project finance across Sub-Saharan Africa, particularly in the infrastructure sector. Power projects will also be a key driver of project finance work on the continent. Today, an estimated 600 million people in Africa lack access to electricity. This power deficient on the continent coincides with the increasing interest and investment in renewable energy sources, and thus we expect to see more renewable energy projects on the continent in 2019. In particular, we anticipate a higher volume of smaller scale power projects due to the demand for less complex projects that can be implemented quickly.

Climate Change, Energy, and Business. Climate change will remain a key issue for countries and companies in 2019, as we continue to see impacts globally from fires in California to a faster melting glaciers in Antarctica. The Intergovernmental Panel on Climate Change has declared Southern Africa a “climate change hot spot.” In 2019, we expect there will be more focus on types of fuel for new projects that are being developed in Africa. The financial impacts and outlook for renewable (wind, geothermal, hydro, and solar) and thermal (gas, coal, diesel, and HFO) energy will be impacted by improvements in technology as well as regulatory and economic issues. The handling of these issues (price, intermittency, base load, land rights, and tax incentives) will be key to financing these projects. There will be increasing pressure from the development finance institutions to finance more renewables projects, but economic factors will determine most fuel sources such as fuel availability, grid stability and strength, and overall project cost. All of this will add complexity and time for completion of these projects. Notably, there are potential wind and geothermal projects in Kenya and Ethiopia, while South Africa is likely to implement the next round of bids for the REIPPP wind projects.

South Africa. With elections expected in May, the Ramaphosa government needs to deliver on economic growth which the World Bank indicates was 1.3 percent in 2017, rising only to 1.4 percent in 2018, due to high levels of unemployment, low business confidence, and policy uncertainty. While the issue of expropriation without compensation looms large, UBS, the world’s largest wealth manager, believes that the South African government will manage the land reform issue “sufficiently well.” Reform of key parastatals including, Eskom and South African Airways, is a pressing matter. The ongoing prosecution of Jacob Zuma and his former officials will be a constant reminder of the corruption and lack of transparency that characterized his tenure. On the positive side, Ramaphosa’s campaign to attract $100 billion in new investments in five years is starting to show results. The South African government is also hopeful that last year’s Job Summit will be a stimulus for the creation of over 10,000 jobs.

Ethiopia. Perhaps the most exciting leader on the continent, 42-year old Dr. Abiy Ahmed has raised expectations that Ethiopia will become the next economic powerhouse on the continent. Not only is Ethiopia the second most populous country, with 100 million people, but it is the fastest growing economy in Africa with a GDP of 8–10 percent. Abiy’s unprecedented reforms include normalized relations with Eritrea after 20 years of hostility, the release of thousands of political prisoners, lifting the state of emergency, and cutting the number of ministries from 28 to 20 while ensuring half of all cabinet positions are filled by women. Some of the challenges that Abiy will face in coming months include managing the influx of refugees from Eritrea (which are arriving at an estimated 10,000 per month), decreasing ethnic tensions and competing factions within the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF), and preparing for local elections this year and national elections next year. The World Bank’s commitment of $1.2 billion in budget support is an important vote of confidence in Abiy’s reform process from the international community.

Nigeria. When elected in 2015, President Buhari promised to realize 10–12 percent annually GDP growth, secure the territorial integrity of the nation, and combat corruption. However, for 2019 the World Bank forecasts 2.2 percent growth for Nigeria, the Boko Haram insurgency in the northeastern part of the country persists despite significant progress, and the country continues to score lower than average for Sub-Saharan African nations on the Corruption Perception Index. These three fundamental issues will frame the presidential election scheduled for February 16, 2019. President Buhari may have an advantage given the power of incumbency but Atiku Abubakar, who was Vice President under President Obasanjo, will present a stiff challenge given his strong ties to business across the country. With 91 political parties and 35 presidential aspirants, there could be a run off given the spirited campaigns of Professor Kingsley Moghalu (former Deputy Governor of the Central Bank), and Donald Duke (a successful former governor of Cross Rivers State), and others.

A version of this blog was first published by African Law & Business. If you have questions about Covington’s Africa Practice, please contact Witney Schneidman at wschneidman@cov.com.

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

]]>Congress takes the lead on U.S.-Africa Policyhttps://www.globalpolicywatch.com/2018/10/congress-takes-the-lead-on-u-s-africa-policy/
Wed, 10 Oct 2018 13:26:03 +0000https://www.globalpolicywatch.com/?p=8944Continue Reading]]>While the nation has been transfixed by the confirmation hearings of Judge Brett Kavanaugh for a seat on the Supreme Court, Congress passed significant legislation on Africa that has attracted virtually no attention.

On October 3, the Senate passed the Better Utilization of Investments Leading to Development Act, better known as the Build Act. President Trump is expected to sign the legislation in the next several days. The Build Act could be the most significant U.S. initiative toward Africa in the Trump era.

For one, the legislation will transform the Overseas Private Investment Corporation (OPIC) into the U.S. International Development Finance Corporation with a budget of $60 billion, twice the size of OPIC’s current budget. Most importantly, the USIDFC will take equity positions in investments, something that OPIC never had authority to do. Equity investments have been essential to the support that Chinese and European development finance funds have provided to companies from their respective countries. The new agency is a much needed instrument of commercial diplomacy that the U.S. has been sorely lacking. Not only will it lead to more U.S. investment in Africa, which will be a stimulus to economic development across the continent, but it makes U.S. companies more competitive and reduces the risk in a growing market that is not well understood by American business.

Six days prior to the passage of the Build Act, Congress reauthorized the Global Food Security Act, first passed in 2016. This landmark legislation, which supports the Obama-era Feed the Future program, is a government-wide strategy to combat hunger and malnutrition in developing countries. As the Alliance to End Hunger notes, the program focuses on increasing sustainable agricultural development, especially in the vital first 1,000 days between a woman’s pregnancy and her child’s second birthday. Since 2011, an estimated 5.2 million families no longer experience hunger and 3.4 million children are living free from stunting as a result of Feed the Future’s work.

In the next several weeks, Congress is expected to pass a third piece of legislation, the Women’s Entrepreneurship and Economic Empowerment Act. This bill would expand the authority of United States Agency for International Development’s microenterprise development program to include small and medium businesses owned, managed, and controlled by women. It would also work to reduce gender disparities related to economic opportunity, support women’s property rights, and eliminate gender-based violence. This legislation has passed the House and is actively supported by CARE, the global anti-poverty organization, and President Trump’s daughter, Ivanka Trump. It has strong bipartisan support in the Senate and 11 cosponsors.

Africa will lose two of its strongest Congressional champions, House Foreign Affairs Chairman Ed Royce and Senate Subcommittee on Africa Chairman Jeff Flake, when both retire at the end of the year. It is worth noting, however, that the Build Act passed the Senate by a 93-6 vote and similarly strong support in the House. While the Trump administration has yet to formulate a policy toward the region, Congress has stepped up in a strong bipartisan manner to play a pivotal role in promoting U.S. interests in Africa, especially as it concerns women, the private sector, and economic development more generally.

This article was originally published on the Brookings Institution’s Africa in Focus blog. It can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

]]>The Heat: Forum on China-Africa Cooperation wraps up in Beijinghttps://www.globalpolicywatch.com/2018/09/the-heat-forum-on-china-africa-cooperation-wraps-up-in-beijing/
Fri, 14 Sep 2018 15:53:35 +0000https://www.globalpolicywatch.com/?p=8894Continue Reading]]>Witney Schneidman, Chair of Covington’s Africa Practice, recently participated in a China Global television show to assess the outcome of the 7th FOCAC meeting in Beijing that was held last week between Chinese leaders and more than 50 African leaders. LINK

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

Of the many statistics that define Africa’s complexity, this may be the most important one: With 200 million people between ages 15 and 24, Africa has the youngest population in the world. This demographic is expected to double by 2045. The question is whether Africa’s youth population is a “ticking time bomb,” a concern expressed by Zambia’s finance minister, Alexander Chikwanda, or, if the continent’s demography will contribute to sustained economic growth and diversification. Despite fast economic growth from 2000 to 2015, the absolute number of poor has increased in Africa and about 70 percent of young people live below the poverty line.

Engaging Africa’s youth is therefore critical, and has to become a top policy priority for African governments and other stakeholders. It is encouraging that some progress has been made. For example, the African Union’s theme for 2017 was “harnessing demographic dividends through investment in youth.” Aligned with this is recent Africa Growth Initiative research that contends governments need better policies and well-trained civil servants in order to enhance job creation, implement pro-poor policy interventions, and ensure effective public service delivery.

A step in this direction occurred last month in Johannesburg, when 200 young leaders from across Africa gathered for the inaugural meeting of the Obama Foundation Leaders: Africa program. The initiative’s goal is to equip these emerging leaders with the tools and inspiration they need to tackle some of the toughest challenges facing their communities, countries, and the continent. Working with President Obama and others, the young leaders took part in skills workshops, engaged with each other, and participated in a town hall with the president.

The gathering coincided with Mandela Day—a celebration of Nelson Mandela’s life—100 years after his birth. Despite the huge strides made by Mandela and others in Africa, the continent still struggles with corruption, slow-moving bureaucracies, and underperforming civil servants. These constraints have far-reaching effects. As President Obama noted in his remarks for the 2018 Nelson Mandela Annual Lecture: “In fact, it is in part because of the failures of governments and powerful elites to squarely address the shortcomings and contradictions of this international order that we now see much of the world threatening to return to an older, a more dangerous, a more brutal way of doing business.”

Despite these shortcomings, President Obama’s message was one of hope based on the belief that the next generation of leaders will utilize technology, innovation, and entrepreneurship to improve governance and opportunities. Indeed, a recent study by the African Union and the OECD found that government action is key to overcoming challenges related to growth, jobs, and inequalities. Elemental to this is the need for government institutions to deliver services efficiently and to create a regulatory environment that fosters development, economic growth, and job creation for today’s youth. Young leaders need to become change agents in the public and private sectors in order to ensure that the continent’s youth population contributes fully to the region’s progress. I have personally observed the positive impact of youth leadership initiatives in Africa, as a member of the Global Advisory Board of IREX, a nonprofit organization that manages YALI’s Mandela Washington Fellows program, and a board member of Emerging Public Leaders.

The Young African Leaders Initiative (YALI), created by the Obama administration and continued by the Trump administration, seeks to achieve this goal. In reality, YALI is one of the most innovative and impactful initiatives implemented by the U.S. in Africa; the fifth class of YALI’s Mandela Washington Fellows recently completed six weeks of leadership training in the U.S. and a summit in Washington with senior administration and congressional officials. Since YALI’s first class of fellows arrived in the U.S. in 2014, nearly 4,000 young Africans have participated in the program. Not only are the Fellows transformative leaders in the areas of public service, business and nonprofits, but more than 77 percent report sustained relationships with other fellows across the 49 countries of sub-Saharan Africa from which they are selected.

Another innovative program, Emerging Public Leaders (EPL), is a public service leadership organization providing high performing African youth with the tools and experiences necessary to become future public leaders and change agents. Through its highly selective Public Service Fellowship, EPL recruits and places talented university graduates into critical civil service positions for two years. Much like the U.S. government’s Presidential Management Fellows program, EPL provides future government leaders with the skills to think critically, act ethically, and ultimately drive good governance in civil service institutions.

Over the past decade, EPL has recruited and supported over 160 fellows through its flagship program in Liberia, the President’s Young Professionals Program, and its recently launched program, Emerging Public Leaders of Ghana. EPL’s longer-term goal is to expand its model beyond Liberia and Ghana to form a pan-African network of 500 public sector leaders by 2022.

Africa’s future is its youth. With nearly 60 percent of Africa’s 1.2 billion population under the age of 35, today’s youth face an unprecedented challenge to create and sustain meaningful change in their communities, countries, and across the globe. Empowering and investing in tomorrow’s leaders is a powerful way not only to honor the legacy of Nelson Mandela, but to work for a future that is secure and equitable.

Dr. Schneidman is a member of the Global Advisory Board of IREX that manages YALI’s Mandela Washington Fellows program and a board member of Emerging Public Leaders. This piece was cross-posted on Brookings’ Africa in Focus Blog. And can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.